Prosperity was established to help publicise and clarify the Money Reform proposal.

Our big issue is publicly-created debt-free money.

Few people are aware that almost all the money we use comes into existence, not by governments creating it, but as a result of a bank making a loan at interest.

Even the government must borrow this money from the private banking system!

We say: If banks can create money out of nothing, and expect people to pay the money back, then governments could do the same, but not need to ask for it back.

Our priority is to generate demand for the government, not the banking system, to create a supply of money debt-free, and to spend it, not lend it, into society on the basis of proven need.

A regular debt-free supply of money into the economy which was spent, not lent, by the government on specific projects, would have the effect, over time, of supplying the economy with a stable means of exchange, rather than the unstable, debt-based means of exchange we have at present.

THERE IS A MASSIVE DEMOCRATIC ISSUE AT STAKE

In our society today, the private banks have a virtual monopoly of credit creation.

Money, the means of exchange of all the necessary goods and services which we need to stay alive – the lifeblood of society – is issued into circulation largely at the say-so of private institutions, and only as interest-bearing debt.

The only part of our money supply which is debt-free is the notes and coins minted by government and consequently bought by the banking system. The revenue from the sale of these notes and coins is credited to the Treasury and represents an effective debt-free input to the public purse.

OUR MONEY SUPPLY RAISES FUNDAMENTAL ISSUES

The nature by which our money – our means of exchange – comes into society, raises fundamental political issues.

These are not just obscure economic questions. They go to the very heart of what we understand as “democracy”.

For example:

– Money is only available by going into debt. Why should we go into debt merely to create our medium of exchange?

– Why should a government – the one institution with the constitutional authority to create money – delegate this responsibility and power to the banking system?

– What does it mean for democracy – rule by the people, for the people, allegedly – when we are reliant upon the banking system for virtually all of our medium of exchange?

– Why do the politicians, professional economists and academics see no connection between the social problems associated with spiralling debt and the way money is created?

LET’S TALK ABOUT “THE DISTRIBUTION OF CREDIT”

As Rosamund Stock has written: “This is a case of sovereignty and of the distribution of resources: it is the banks who decide who gets what now that a large part of people’s spending power comes from bank-created credit. We talk about the distribution of wealth but we have not even started on the distribution of credit.”

WE WANT PUBLICLY-CREATED MONEY

Our democratic argument is that it is wrong for virtually all our money supply to be created by private means.

We need a publicly-created supply of money.

We need to ensure that all the people have a stake in the creation of their means of exchange.

We need to ensure that they reap the benefits of a publicly-created means of exchange.

At the moment, those who reap the benefit from the present debt-based system, are the bankers who reap the interest, and the speculators who engage in currency manipulation and hostile takeovers.

However, one of the main lines of objection we receive is usually a variation on the theme that the government of the day would abuse its power to create this debt-free public money – usually by “over-spending” or by “centralising its power”.

We examine some of these specific objections below.

As we do so, let us distinguish the economic merits of any proposal as being a related, but separate, issue from its democratic merits.

For example, the objection that Money Reform will “centralise power” is really a criticism of the democratic deficit in society, rather than a criticism of the economic correctness of the Money Reform proposal per se.

If our proposal is correct economically, then let us ensure we can make it correct democratically.

FREQUENTLY HEARD OBJECTIONS TO DEBT-FREE MONEY

OBJECTION NUMBER 1: “The last thing we need is for our government to have access to an unlimited supply of money.”

ANSWER NUMBER 1: We are not suggesting that money should be created without limit. That would, of course, be inflationary and irresponsible. We are not suggesting that the government simply “prints money willy nilly ad lib”.

We are suggesting that a specific amount of debt-free money should be created for specific projects by a democratic and accountable state authority. The money is only created when a project is agreed, and it is only created for that particular project. It is spent, not lent, into society on that basis.

OBJECTION NUMBER 2: “What is to stop any government simply spending as much debt-free money as it chooses, in order to butter-up the electorate in time for the next election? For example, it could simply use the debt-free money to lower taxes and hence boost its own popularity.”

ANSWER NUMBER 2: If the government were given the power to create debt-free money then it would be necessary for its new money creation powers to be strictly controlled within a set of legal and constitutional parameters.

If the government does not make this calculation then it will mismanage the economy and pay the price of electoral failure. There will, as usual, be no incentive for any government to over-spend and risk inflation.

OBJECTION NUMBER 3: “But don’t you know that ‘government is the problem’. Why do you want to give it more power?”

ANSWER NUMBER 3: Some people are hostile to “the government” per se. Without getting into a debate on that particular political view, we point out the following:

The priority is to bring the money supply under democratic control. Government involvement is a means to this end, not the end in itself.

Money Reformers seek Economic Democracy – the democratisation of economic power. This requires the democratisation of the power to create the means of exchange – the money – which we all need to survive.

That democratisation is obviously going to involve the government playing a major role – in a democratically accountable manner.

There has never been any suggested solution to the world’s economic woes which does not involve “the government”, in some form, playing a major role. To imagine that Money Reform can occur without the involvement of government is sheer idle fantasy.

OBJECTION NUMBER 4: “Look at the present democratic deficit between the government and the people. How can you trust the government to get it right?”

ANSWER NUMBER 4: That is not an argument against the rightness of the Money Reform proposal, rather it is an argument against a particular political situation.

Those are two different issues – the Economic Issue, and the Democratic Issue. Don’t confuse them.

OBJECTION NUMBER 5: “Your idea of government-created debt-free money will simply centralise even more power in the hands of government. It is a license for tyranny.”

ANSWER NUMBER 5: Again, we should distinguish between the economics of our proposal, and how, politically, it would be administered.

Of course, Money Reformers are agreed that it will be necessary to ensure that the administration of our economic proposal does not centralise economic power.

But even as the system stands at the moment, there is an extent of democratic accountability with the government – where there is none with the banks. Indeed the banks represent a form of “hidden government.”

It is the government, which the voters empower, which will make the decisions, not the un-elected bankers. It is the government which will pay the price if it gets it wrong. Governments can be voted out, bankers can’t!

OBJECTION NUMBER 6: “Don’t you know that Karl Marx believed in ‘Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.’ (Chapter 2, The Communist Manifesto) Your proposal will simply centralise all financial power, as Karl Marx wanted.”

ANSWER NUMBER 6: Nobody is saying we “centralise all credit”!

We are simply calling for a greater proportion of our money supply to be created debt-free by a democratically accountable public body, and spent, not lent, into society.

Moreover, Money Reformers still see a role for the private banking system.

Publicly-created money is not a “left-wing” idea, nor is it a “right-wing” idea. It is intended to help democratise – not centralise – economic power.

Anyway, Marx did not challenge the debt-based money system, nor advocate debt-free money. His proposals were being made within the conventional economic system.

OBJECTION NUMBER 7: “The availability of debt-free money could open up the potential for socially desirable projects, but it could also make it easier for the government to spend on bad things!”

ANSWER NUMBER 7: That’s true. But that’s the sort of political issue which will always be with us.

For its part, the government will still be constrained in its spending decisions by normal political considerations – whether those be with regard to its ideology, or with regard to what it calculates it can get away with, or with regard to its continued electoral survival – just as it is at the moment.

For our part, even under a reformed money system we will still have to hold our government to account. We will still have to ask of it some fundamental questions.

For example, we will still need to ask:

– Under whose authority are decisions being taken?

– Are issues presented to us one choice at a time?

– Are decisions being taken after proper consultation?

– Do they reflect the will of the people, to the extent that it can be defined?

– Are decisions made on a proper basis of responsibility, and not just necessarily on a question of numbers … and so on.

So, nobody is saying that the Money Reform proposal is some kind of be-all-and-end-all, which will fix everything for all time.

If government is vested with these powers, then, if corruption occurs, people will know the source, and there will be an ability to seek redress. To that extent, people will have been democratically empowered by the reform.

If money creation powers are vested primarily in private institutions, however, then the abuse is hidden. It is anonymous, and the buck stops nowhere. It is difficult, or impossible to identify the culprits, and rectify the problem, even though the abuse impacts negatively upon all of society.

Democratically speaking, the crucial power over the money supply should be vested in transparent and accountable public bodies. Publicly-created money is a democratic imperative.